Biopharma Companies Outsourcing More Jobs

Biopharmaceutical manufacturers are beginning to consider outsourcing as a viable option for cutting their organization’s costs, especially as industry service suppliers offer a broader array of potential activities. Biopharma companies repot they are contracting out more and different jobs and manufacturing operations in an effort to reduce costs, according to BioPlan Associates’ 12th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production.

The 2015 study measured a broad set of cost-cutting activities that companies have undertaken during the past 12 months. BioPlan specifically evaluates whether cost-cutting was being increased in various areas of outsourcing. As a cost-cutting action, outsourcing sits near the bottom rung compared to more common cost-cutting measures. The use of outsourcing as a cost-cutting approach, however, is on the rise.
Specifically, approximately 15% of respondents to the 2015 survey had outsourced manufacturing to domestic service providers in the past year specifically to reduce costs, up from 9% in 2014 and the highest mark this decade. Likewise, the percentage of respondents offshoring work in an effort to cut costs has been on a gradual rise, from 5.7% in 2011 to a new high point of 14.3% in 2015.

While those are fairly small percentages, the increase indicates a recognition that outsourcing, when done for strategic reasons, can also effectively reduce costs and increase productivity. Many respondents have been outsourcing for years; any cost-savings realized would have been accrued in prior years and, as such, these respondents would be less apt to account for them when thinking about the most recent 12 months.
Outsourcing is also increasingly being viewed in a wider lens than just costs, with the decision calculus including benefits such as flexibility, lower capital investment, and even access to novel technologies. Nevertheless, the increases in outsourcing due to cost cutting over the past few years may also suggest that outsourcing service providers are now becoming a more cost-competitive option.